To further competition, the
California Public Utilities Commission (CPUC) requested that
Pacific Gas and Electric Company (PG&E) voluntarily divest
ownership of some of its generating capacity. PG&E's
application (Application No. 96-11-020), originally filed in
November 1996 (and subsequently amended), responds to the CPUC's
request for voluntary divestiture and seeks authority from the
CPUC to sell three of its eight fossil-fueled generating
facilities through a competitive auction process. The proposed
power plant sales are commonly referred to as
"divestiture."

The facilities proposed to be
divested include the following: Morro Bay Power Plant, Moss
Landing Power Plant, and Oakland Power Plant. The locations of
these power plants are shown in Figure 1. By selling these three plants, PG&E would divest itself of 2,645
megawatts (MW) of generating capacity, about 42% of the
utility's total fossil-fuel generating capacity.

Approval of the specific
divestiture plans by the CPUC is required by Public Utilities
Code Section 851 prior to the sale of these power plants. It
is the responsibility of the CPUC to determine whether the
proposed divestiture plans "will be adverse to the public
interest."

The sale of these power plants
would include transfer of permits necessary for the operation of
each plant (e.g., air and water permits). A more detailed project
description is included in the attached Initial Study.

ENVIRONMENTAL
DETERMINATION

An Initial Study
(attached) was prepared to assess the potential effects on the
environment of the divestiture project, and the respective
significance of those effects. Based on the Initial Study, the
proposed divestiture of PG&E's generating assets will have
less than significant effects or no impact in the areas of:

Land Use and Planning

Transportation/Circulation

Public Services

Population and Housing

Energy and Mineral Resources

Hazards

Noise

Utilities and Service Systems

Aesthetics

Recreation

Cumulative Impacts

Geological Problems

Water

The Initial Study
indicates that PG&E's proposed divestiture would have
potentially significant impacts in the areas of:

Air Quality

Biological Reosurces

Cultural Resources

Each of the identified
impacts can be mitigated to avoid the impact or reduce it to a
less than significant level. The mitigation measures, which
PG&E has agreed to include in the project, are as follows:

Air Quality

4.5.a.1

If
the SLOAPCD has not adopted the planned revisions
to Rule 429 (as discussed above) prior to sale of
the Morro Bay power plant, then:

To assure that the
NOx emission concentration limits and daily
emission caps will apply to a new owner of the
Morro Bay Power Plant, regardless of the status
of Rule 429 modifications, PG&E will request
that the Air District complete modifications to
the plant's permits to incorporate emission
limits into the permits to operate in
substantially the form and stringency described
in Draft Rule 429.

PG&E agrees
that the transfer of title for Morro Bay Power
Plant will not occur until either Rule 429 or the
plant's permit to operate has been so modified.

Monitoring Action: PG&E provides the CPUC mitigation monitor with a copy of either the revised Rule 429 or the modified permit to operate.

Responsibility: CPUC

Timing: At least 3 business days
prior to the transfer of title.

4.5.a.2

If the MBUAPCD has not completed the actions necessary to apply the provisions of Rule 431 to a non-utility owner of the Moss Landing Power Plant prior to the transfer of title for the plant:

To assure that the
NOx emission concentration limits and daily
emission caps will apply to a new owner of the
Moss Landing power plant regardless of the status
of Rule 431 modifications, PG&E will request
that the Air District complete modifications to
the plant's permits to incorporate emission
limits to the permits to operate in substantially
the form and stringency described in Rule 431.

PG&E agrees that the transfer of title for
Morro Bay Power Plant will not occur until either
Rule 431 or the plant is permit to operate has
been so modified.

Monitoring
Action: PG&E provides
the CPUC mitigation monitor
with a copy of either the
revised Rule 431 or the
modified permit to operate.

Responsibility:
CPUC

Timing:
At least 3 business days
prior to the transfer of
title.

Biology

4.7.a.1

PG&E
shall provide each new owner, for the respective
plant, with PG&E jurisdictional wetlands and
special status species and habitats informational
materials and training documents regarding
resources associated with Morro Creek (Morro Bay)
and the Moro Cojo and Elkhorn Sloughs (Moss
Landing), to assist new owners in knowing the
location of jurisdictional wetlands, special
status species and habitats, and in meeting their
legal obligations regarding endangered,
threatened, or rare species or their habitats.

Monitoring
Action: PG&E will
provide the CPUC mitigation
monitor with disclosure form
signed by the new owner
listing documents received to
accomplish this condition.

Responsibility:
CPUC

Timing: At
least three business days
prior to transfer of title of
the plant(s)

Cultural Resources

4.14.b.1

PG&E shall prepare and certify its intent to
comply with a program to address potential
impacts to archaeological resources from PG&E
actions related to the divestiture at the Morro
Bay and Moss Landing power plants, such as
construction to separate the properties or soil
remediation activities. The program shall include
provisions in PG&E construction documents and
protocols for coordination with appropriate
resource agencies. The program shall at a minimum
include the following provisions:

A qualified
archaeologist shall be consulted prior to
implementing construction or soil remediation
activities that will involve earthmoving or soil
excavation, and the archaeologist shall be
available for consultation or evaluation or any
previously undisturbed, known archaeological
areas, a qualified archaeologist shall monitor
earthmoving and soil excavation activities,
consistent with relevant Federal, State, and
local guidelines. If an unrecorded resource is
discovered, construction or excavation activities
shall be temporarily halted or directed to other
areas pending the archaeologist's evaluation of
its significance. If the resource is significant,
data collection, excavation, or other standard
archaeological or historical procedures shall be
implemented to mitigate impacts pursuant to the
archaeologist's direction. If any human remains
are encountered, the archaeologist shall contact
the appropriate County Coroner immediately and
security measures shall be implemented to ensure
that burials are not vandalized until the
decision of burial deposition has been made
pursuant to California law. If human remains are
determined to be Native American interments, the
Coroner shall contact the Native American
Heritage Commission pursuant to Public Resources
Code Section 5097.98 and follow the procedures
stated herein and other applicable laws. A report
by the archaeologist evaluating the find and
identifying mitigation actions taken shall be
submitted to the CPUC. Where appropriate to
protect the location and sensitivity of the
cultural resources, the report may be submitted
under Public Utilities Code Section 583 or other
appropriate confidentiality provisions.

Timing: Approval
by CPUC mitigation monitor of
archaeological mitigation
program at least 10 business
days prior to transfer of
ownership of the Morro Bay
and Moss Landing plants;
review implementation reports
upon submittal.

4.14.b.2

PG&E shall provide the new owner of the Morro
Bay and Moss Landing plants with PG&E's
archaeological resource information materials and
any training documents concerning the new owner's
respective plants. This will assist the new owner
in knowing the locations of such resources, and
in meeting their legal obligations regarding
preservation of those resources.

Monitoring
Action: PG&E will
provide the CPUC mitigation
monitor with a disclosure
form, for each plant
specified, signed by the new
owner listing documents
received to accomplish this
action.

Responsibility:
CPUC

Timing: At
least 3 business days prior
to the transfer of title for
each plant.

In light of the analysis
in the Initial Study, and the mitigation measures identified
therein (and listed above) for inclusion into the project, the
CPUC proposes to find that the project will not have a
significant effect on the environment.